Savers lucky to get 2% as they face bleak choice of poor cash Isa rates

Banks and building societies are launching new cash Isa accounts, but top rates have dropped by a third or more on last year’s offerings.

Nationwide, Lloyds TSB and Halifax have all increased their rates slightly for new savers on their easy-access accounts as we approach the end of the tax year. Others are expected to follow suit shortly.

Savers have until April 5 to use their cash Isa allowance for this tax year. You can put in £5,640, and cannot carry your allowance over to next year.

Breaking the bank: Savers have until April 5 to use their cash Isa allowance for this tax year

Banks and building societies typically launch top-paying accounts at this time of year for new savers.

They look to attract both those who
have not used their allowance for this year and early birds looking to
invest for the start of the new tax year on April 6.

This year the pickings are
substantially lower than last. The average rate on an easy-access
account, including an initial bonus, is 1.85 per cent now — a quarter
lower than last year’s 2.41 per cent.

All three accounts include a bonus for the first year, so savers need to make sure they move their money after 12 months.

But the largest drop comes from Santander. Its Direct Isa issue 13, on sale now, pays just 1.75 per cent
— nearly half its 3.3 per cent offered on the same deal last year.

Rates have fallen dramatically since
last summer when the Government introduced its Funding for Lending
Scheme offering cheap finance to banks and building societies.

The side-effect is that they no longer need to pay so much to attract savers.

There are better rates on offer from
other providers (see table below) with the top easy-access rate coming from
Cheshire BS at 2.5 per centfor those willing to operate their account
over the telephone.

Barclays Isa Saver Issue 2, at
2.02 per cent, is among the best deals from large providers in the High
Street. Among smaller providers you can do better with Harpenden BS,
which pays 2.25 per cent on its easy-access account.

Fixed-rate deals look poor value — you can earn less for tying your money up for a year than with the top easy-access accounts.